nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2014‒08‒25
twenty-one papers chosen by

  1. Decomposing Bjurek Productivity Indexes into Explanatory Factors By W. Erwin Diewert; Kevin J. Fox
  2. How enterprise strategies are related to innovation and productivity change: An empirical study of Japanese manufacturing firms By Fujii, Hidemichi; Kazuma, Edamura; Sumikura, Koichi; Furusawa, Yoko; Fukuzawa, Naomi; Managi, Shunsuke
  3. The Impact of ICT on Productivity: Evidence from Turkish Manufacturing Industry By Kılıçaslan, Yılmaz; Kayış, Aliye Atay; Sickles, Robin; Üçdoğruk, Yeşim
  4. Decomposition of productivity considering multi-environmental pollutants in Chinese industrial sector By Fujii, Hidemichi; Cao, Jing; Managi, Shunsuke
  5. How to assess agricultural water productivity ? looking for water in the agricultural productivity and efficiency literature By Scheierling, Susanne M.; Treguer, David O.; Booker, James F.; Decker, Elisabeth
  6. Is Productivity Growth Correlated with Improvements in Management Quality? An empirical study using interview surveys in Korea and Japan By MIYAGAWA Tsutomu; Keun LEE; EDAMURA Kazuma; YoungGak KIM; Hosung JUNG
  7. Does Weather Have an Impact on Electricity Distribution Efficiency? Evidence from South America By Karim L. Anaya; Michael G. Pollitt
  8. Dynamic Efficiency and Incentive Regulation: An Application to Electricity Distribution Networks By Rahmatallah Poudineh; Grigorios Emvalomatis; Tooraj Jamasb
  9. Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry By Tetsuji Okazaki; Chad Syverson; Atsushi Ohyama; Serguey Braguinsky
  10. Former foreign affiliates: Cast out and outperformed? By Beata Javorcik; Steven Poelhekke
  11. Did the Rising Importance of Services Decelerate Overall Productivity Improvement of Turkey during 2002-2007? By Üngör, Murat
  12. Inefficiency persistence and heterogeneity in Colombian electricity distribution utilities By Jorge E. Galán; Michael G. Pollitt
  13. Multi-directional efficiency analysis-based regional industrial environmental performance evaluation of China By Ke Wang; Shiwei Yu; Mo-Jie Li; Yi-Ming Wei
  14. Intangible investment and Technical efficiency: The case of software-intensive manufacturing firms in Turkey By Derya Fındık; Aysıt Tansel
  15. Regional productivity in a multi-speed Europe By Don J. Webber; Min-Hua Jen; Eoin O'Leary
  16. Firm Productivity and Carbon Leakage: A Study of Swedish Manufacturing Firms By Ferguson, Shon; Sanctuary, Mark
  17. Does Culture Affect Local Productivity and Urban Amenities? By Brahim Boualam; ;
  18. Service Sector Productivity and Economic Growth in Asia By Lee, Jong-Wha; McKibbin, Warwick J.
  19. The Impact of Mergers on Quality Provision: Evidence from the Airline Industry By Jeffrey T. Prince; Daniel H. Simon
  20. Birthplace diversity and productivity spill-overs in firms By René Böheim; Thomas Horvath; Karin Mayr
  21. Can Open Service Sector FDI Policy Enhance Manufacturing Productivity? Evidence from Indonesia By Victor Duggan; Sjamsu Rahardja; Gonzalo Varela

  1. By: W. Erwin Diewert (University of British Columbia and School of Economics, Australian School of Business, the University of New South Wales); Kevin J. Fox (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: Caves, Christensen, Diewert introduced Malmquist output, input and productivity indexes into production theory in a systematic way. This paper revisits the debate on how to decompose Bjurek’s concept of a Malmquist productivity index into explanatory factors, with a focus on extracting technical progress, technical efficiency change, and returns to scale components. In order to define these components, a reference technology is required. The paper does not make any convexity assumptions on the reference technology but instead follows the example of Tulkens and his coauthors in assuming that the reference technology satisfies free disposability assumptions. The existence and properties of the underlying distance functions of the productivity decomposition are proven under relatively unrestrictive assumptions. The paper provides for the first time a theoretical justification for the geometric average form of the Bjurek productivity index.
    Keywords: Productivity indexes, Malmquist indexes, technical efficiency, technical progress, returns to scale, Data Envelopment Analysis, Free Disposal Hulls, nonparametric approaches to production theory, distance functions
    JEL: C43 D24 E23
    Date: 2014–06
  2. By: Fujii, Hidemichi; Kazuma, Edamura; Sumikura, Koichi; Furusawa, Yoko; Fukuzawa, Naomi; Managi, Shunsuke
    Abstract: This study analyzes the total factor productivity of 1,067 Japanese manufacturing firms. In production estimation, we employ the directional distance function and Luenberger productivity indicator. Research and development strategy survey data are used to analyze the determinant factors related to improvements in innovation and productivity. Our results indicate that increasing technology and knowledge through a “black box” process is related to an increase in productivity. Furthermore, the protection and management of production knowledge and expertise is a valid method of increasing global technical change.
    Keywords: Innovation, productivity change, R&D strategy, directional distance function, Japanese manufacturing firms
    JEL: D24 J24 O38 O47
    Date: 2014
  3. By: Kılıçaslan, Yılmaz (Department of Economics, Anadolu University, Eskişehir, Turkey); Kayış, Aliye Atay (Department of Econometrics, Süleyman Demirel University, Isparta, Turkey.); Sickles, Robin (Department of Economics, Rice University, Houston, TX, USA.); Üçdoğruk, Yeşim (Department of Economics, Dokuz Eylül University, Turkey)
    Abstract: This paper aims to explore the impact of ICT on output and/or productivity growth in Turkish manufacturing. The analysis is based on the firm level data obtain from Turkish Statistical Institute (TURKSTAT) and covers the period from 2003 to 2010. Two different methodologies are used in exploring the impact of ICT on output growth or productivity. The first method is what is called “growth accounting”. This methodology decomposes output/productivity growth into its sources and shows how much of the growth is due to production factor changes or TFP. The second approach to TFP calculation and ICT impact analysis will be an econometric approach. Econometric modeling will be based both on static and dynamic panel data analysis, i.e. Generalized Methods of Moments (GMM). Our preliminary findings show that the impact of ICT capital is twice larger than that of conventional capital.
    Keywords: Productivity, TFP, ICT, manufacturing industry, Turkey
    JEL: D24 L60 O14
    Date: 2013
  4. By: Fujii, Hidemichi; Cao, Jing; Managi, Shunsuke
    Abstract: The objective of this study is to calculate and decompose productivity incorporating multi-environmental pollutants in Chinese industrial sectors from 1992 to 2008. We apply a weighted Russell directional distance model to calculate productivity from both the economic and environmental performance. Main findings are, 1) Chinese industrial sectors increased productivity, with the main contributing factors being labor saving prior to 2000. 2) The main contributing factors for productivity growth in coastal areas include both economic and environmental performance improvement. While central and west regions improved productivity due to economic development, they have a trade-off relationship between economic and environmental performance.
    Keywords: Productivity, Chinese industrial sector, Pollution
    JEL: O44 O47 Q53 Q56
    Date: 2014
  5. By: Scheierling, Susanne M.; Treguer, David O.; Booker, James F.; Decker, Elisabeth
    Abstract: Given population and income growth, it is widely expected that the agricultural sector will have to expand the use of water for irrigation to meet rising food demand; at the same time, the competition for water resources is growing in many regions. As a response, it is increasingly recommended that efforts should focus on improving water productivity in agriculture, and significant public and private investments are being made with this goal in mind. Yet most public communications are vague on the meaning of agricultural water productivity, and on what should be done to improve it. They also tend to emphasize water as if it were the only input that mattered. This paper presents findings from a first attempt to survey the agricultural productivity and efficiency literature with regard to the explicit inclusion of water aspects in productivity and efficiency measurements, with the aim of contributing to the discussion on how to assess and possibly improve agricultural water productivity. The focus is on studies applying single-factor productivity measures, total factor productivity indices, frontier models, and deductive models that incorporate water. A key finding is that most studies either incorporate field- and basin-level aspects but focus only on a single input (water), or they apply a multi-factor approach but do not tackle the basin level. It seems that no study on agricultural water productivity has yet presented an approach that accounts for multiple inputs and basin-level issues. However, deductive methods do provide the flexibility to overcome many of the limitations of the other methods.
    Keywords: Water Supply and Systems,Water Supply and Sanitation Governance and Institutions,Water and Industry,Town Water Supply and Sanitation,Water Conservation
    Date: 2014–07–01
  6. By: MIYAGAWA Tsutomu; Keun LEE; EDAMURA Kazuma; YoungGak KIM; Hosung JUNG
    Abstract: Bloom and Van Reenen (2007) show that differences in management practices are correlated with productivity differences at the firm level. In this paper, we conducted similar interview surveys on management practices in Japanese and Korean firms in 2008 and 2012. We find that overall management scores in Japan—as an average of organizational and human resource management scores—are higher than those in Korea. However, the second survey shows that the gap in management scores between the two countries has shrunken over time. In addition, the average management quality in Korean large firms has surpassed that of Japanese large firms. This result is consistent with the literature comparing big businesses in Korea and Japan. This study also compares additional aspects of management styles, such as speed in decision making and the role of various communication channels, which is not done in the literature. When we estimate a production function including management score using all samples, we find a positive and significant relationship between management scores and productivity. Most estimation results show that organizational management scores are correlated with firm performances in Japanese firms, while human resource management scores are correlated with performance in Korean firms. We also find that management practices are correlated with improvements in capital and labor efficiencies. In the case of Japan, better organizational management practices in the past improve current firm performance. Our results show that the Japanese government and firms should promote management reforms to restore international competitiveness.
    Date: 2014–08
  7. By: Karim L. Anaya; Michael G. Pollitt
    Abstract: This paper analyses the influence of weather variables on the efficiency of electricity distribution utilities in Argentina, Brazil, Chile and Peru. The data covers 82 firms that operate in the previously mentioned countries which represent more than 90 per cent of the distribution market of energy delivered for the period 1998-2008. The stochastic frontier analysis (SFA) is applied with a translog input distance function approach. A combination of cost and cost-quality models is proposed to create better discussions. Weather data are collected from 429 meteorological stations and lightning data (flash rate) are collected from 3,423 coordinates provided by NASA. A geographic information system (GIS) is used for locating the firms’ service areas and for allocating their respective meteorological stations and coordinates. Results suggest that on average under cost models there is a significant increase in efficiency when weather is incorporated in the production function. Firms from Brazil and Peru are those which operate in less favourable weather conditions. Under the cost-quality models, on average the effect of weather is much lower. From this, it appears to be that firms have internalised the effects of weather and have adapted their networks with consideration to the environment in which they operate. A company-level analysis indicates that across models an important number of companies are affected by weather. Regulators are advised to make the case for the proper adjustments of efficiency scores when specific firms face important efficiency changes due to weather.
    Keywords: technical efficiency, stocastic frontier analysis, electricity distribution markets, weather, South America
    JEL: C23 C52 D24 L94 Q50
    Date: 2014–08–04
  8. By: Rahmatallah Poudineh; Grigorios Emvalomatis; Tooraj Jamasb
    Abstract: Efficiency and productivity analysis is a central concept in incentive-based regulation of network utilities. However, the efficiency measures obtained from benchmarking predominantly reflect short term performance and hence, provide only a snapshot of the firm’s path towards its long run equilibrium. On the other hand, the factors affecting the short run behaviour of firms may not be adjusted instantaneously when firms undertake investment. In these instances, short run inefficiency caused by investments will be transmitted to subsequent periods. This effect, which arises from costs associated with the adjustment of capital stock or production capacity, is problematic under incentive regulation with ex-post regulatory treatment of capital expenditure. This is because it adversely affects the firms’ short term efficiency and, consequently, regulated revenue. This paper analyses the dynamic behaviour of inefficiency for a balanced panel of 128 Norwegian electricity distribution companies from 2004 to 2010. We show that, in a given period, inefficiency is a combination of period-specific effects (shocks) plus a carry-over component from previous periods due to adjustment costs. Also, we estimate these two components of inefficiency along with the rate of inefficiency transmission between periods.
    Keywords: Dynamic efficiency, innovation, investment incentives, benchmarking, electricity
    JEL: L43 L51 L94 D21 D23 D24
    Date: 2014–08–04
  9. By: Tetsuji Okazaki (University of Tokyo); Chad Syverson (University of Chicago Booth School of Business and NBER); Atsushi Ohyama (Hokkaido University); Serguey Braguinsky (Carnegie Mellon University)
    Abstract: We explore how changes in ownership and managerial control affect the productivity and profitability of producers. Using detailed operational, financial, and ownership data from the Japanese cotton spinning industry at the turn of the last century, we find a more nuanced picture than the straightforward “higher productivity buys lower productivity†story commonly appealed to in the literature. Acquired firms’ production facilities were not on average less physically productive than the plants of the acquiring firms before acquisition, conditional on operating. They were much less profitable, however, due to consistently higher inventory levels and lower capacity utilization—differences which reflected problems in managing the uncertainties of demand. When purchased by more profitable firms, these less profitable acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels, consistent with acquiring owner/managers spreading their better demand management abilities across the acquired capital.
    Date: 2014
  10. By: Beata Javorcik; Steven Poelhekke
    Abstract: The literature has documented a positive effect of foreign ownership on firm performance. But is this effect due to a one-time knowledge transfer or does it rely on continuous injections of knowledge? To shed light on this question we focus on divestments, that is, foreign affiliates that are sold to local owners. To establish a causal effect of the ownership change we combine a difference-in-differences approach with propensity score matching. We use plant-level panel data from the Indonesian Census of Manufacturing covering the period 1990-2009. We consider 157 cases of divestment, where a large set of plant characteristics is available two years before and three years after the ownership change and for which observationally similar control plants exist. The results indicate that divestment is associated with a drop in total factor productivity accompanied by a decline in output, markups as well as export and import intensity. The findings are consistent with the benefits of foreign ownership being driven by continuous supply of headquarter services from the foreign parent.
    Keywords: divestment; foreign direct investment; Indonesia; productivity
    JEL: F23
    Date: 2014–08
  11. By: Üngör, Murat (Research and Monetary Policy Department, Central Bank of the Republic of Turkey, Ankara, Turkey)
    Abstract: When examined in isolation, the 2002-2007 period in Turkey stands out as a high growth period. However, the relative performance of Turkey in this period is weaker compared to China. The service sector in Turkey had the lowest labor productivity growth rate. Counterfactual experiments based on a three-sector model point out that the service sector represented a drag on aggregate productivity in Turkey. Using a newly constructed detailed sectoral database for China, I argue that if the service sector in Turkey had had the same annual productivity growth rates as observed in China, then the average annual growth rate of the aggregate labor productivity would have been 7.8% instead of 5.7% during 2002-2007.
    Keywords: Sectoral productivity; services; China; Turkey.
    JEL: O11 O40 O57
    Date: 2013
  12. By: Jorge E. Galán; Michael G. Pollitt
    Abstract: The electricity reform in Colombia has exhibited gains in terms of reliability but its effects on firms efficiency and service quality have not been clear. Previous studies evaluating the performance of distribution companies after the reform have not found evidence of improvements, although large differences in efficiency have been found among firms. This suggests high inefficiency persistence and heterogeneity in the Colombian distribution sector. In this paper, we propose an extension of dynamic stochastic frontier models that accounts for unobserved heterogeneity in the inefficiency persistence and in the technology. The model incorporates total expenses, service quality and energy losses in an efficiency analysis of Colombian distributors over fifteen years after the reform. We identify the presence of high inefficiency persistence in the sector, and important differences between firms. In particular, rural companies and firms with small customers present low persistence and evidence the largest gains in efficiency during the period. However, increases in efficiency are only manifested during the last five years when the main improvements in service quality and energy losses are presented. Overall, inefficiency persistence, customer density and consumption density are found to be important criteria to be considered for regulatory purposes.
    Keywords: Bayesian inference, electricity distribution, dynamic effects, heterogeneity, stochastic frontier models
    JEL: C11 C23 C51 D24 L94
    Date: 2014–08–04
  13. By: Ke Wang; Shiwei Yu; Mo-Jie Li; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)
    Abstract: This study evaluates the environmental efficiency of industrial sectors of Chinese major cities. The Multi-directional efficiency analysis (MEA) approach are utilized for evaluation, thus both the integrated MEA efficiency levels and the efficiency patterns, which are represented by the variable specific MEA efficiency according to each type of the industrial pollutant emission or discharge, of Chinese major city are detected. In addition the industrial energy conservation and pollutant reduction potentials are measured and the relationship between environmental pressure and income are explored at the regional level of China. The main findings include: (i) The MEA environmental efficiency increases of the economic less developed cities were faster than the cities in the well-developed region, which indicates that the inequitable nationwide industrial developments of Chinese cities have started to alleviate. (ii) Although some Chinese cities show similar environmental efficiency levels, the undesirable output variable specific efficiency patterns of these cities are diversified, and according to the variable specific efficiency, the most possible efficiency increase potential of each Chinese major city can be identified. (iii) An N-shaped Environmental Kuznets Curve exists in the industrial sectors of Chinese major cities. (iv) Different Chinese cities should have different industrial pollutant reduction priorities, which east China cities should pay more attention on their industrial waste gas emissions and industrial waste water discharges, while west China cities should mainly focus on their industrial soot and dust emissions, and solid waste discharges.
    Keywords: Environmental performance,Industrial sector,Pollutant reduction potential,Multi-directional Efficiency Analysis (MEA)
    JEL: Q58 C61
    Date: 2013–07
  14. By: Derya Fındık (Department of Science and Technology Policy Studies, Middle East Technical University); Aysıt Tansel (Cornell University, Ithaca, USA, Middle East Technical University, Ankara, Turkey)
    Abstract: This paper analyzes the effect of intangible investment on firm efficiency with an emphasis on its software component. Stochastic production frontier approach is used to simultaneously estimate the production function and the determinants of technical efficiency in the software intensive manufacturing firms in Turkey for the period 2003-2007. Firms are classified based on the technology group. High technology and low technology firms are estimated separately in order to reveal differentials in their firm efficiency. The results show that the effect of software investment on firm efficiency is larger in high technology firms which operate in areas such as chemicals, electricity, and machinery as compared to that of the low technology firms which operate in areas such as textiles, food, paper, and unclassified manufacturing. Further, among the high technology firms, the effect of the software investment is smaller than the effect of research and development personnel expenditure. This result shows that the presence of R&D personnel is more important than the software investment for software intensive manufacturing firms in Turkey.
    Keywords: intangible investment, software investment, efficiency
    JEL: L21 L22 L23 L25
    Date: 2013
  15. By: Don J. Webber (University of the West of England, Bristol); Min-Hua Jen (Imperial University); Eoin O'Leary (University College Cork)
    Abstract: This paper examines productivity dynamics at different spatial scales across European countries. Application of non-parametric simultaneous estimation techniques to a hierarchical dataset permits us to consider explicitly the extent to which the national-level is important for understanding regional-level productivity variation. The results show considerable national and regional level productivity variation which is not constant and evolves over time. There is divergence at all spatial scales and groups of regions that follow different growth trajectories with group membership not being confined by national borders. The results imply that policymakers need to take cognizance of the multi-layered economic geographies in which they are located. There are also group dynamics that challenge the dominance of the national economic positions and should be considered when shaping policy.
    Keywords: Multi-level modelling; Regional productivity; Groups
    JEL: R11 O47
    Date: 2014–01–08
  16. By: Ferguson, Shon (Research Institute of Industrial Economics (IFN)); Sanctuary, Mark (Beijer Institute of Ecological Economics)
    Abstract: This paper examines the intensive and extensive margins of carbon leakage. The analysis uses an increase in the Swedish electricity price to identify the impact on imports at the firm and product level. Our model of heterogenous firms predicts that higher domestic electricity prices lead firms to substitute towards imports of electricity-intense products.
    Keywords: Firm heterogeneity; Carbon leakage; Energy; Importing
    JEL: D21 F18
    Date: 2014–08–12
  17. By: Brahim Boualam; ;
    Abstract: Does a better cultural milieu make a city more livable for residents and improve its business environment for firms? I compute a measure of cultural specialization for 346 U.S. metropolitan areas and ask if differences in cultural environment capitalize into housing price and wage differentials. Simple correlations replicate standard results from the literature: cities that are more specialized in cultural occupations enjoy higher factor prices. Estimations using time-series data, controlling for city characteristics and correcting for endogeneity weaken the magnitude of this effect. Even though the arts and culture might be appealing to some people and firms, such determinants are not strong enough to affect factor prices at the city level.
    Keywords: Urban economics, location choice, local amenities, culture.
    Date: 2014–01
  18. By: Lee, Jong-Wha (Asian Development Bank Institute); McKibbin, Warwick J. (Asian Development Bank Institute)
    Abstract: This paper explores the impacts of more rapid growth in labor productivity in the service sector in Asia based on an empirical general equilibrium model. The model allows for input–output linkages and capital movements across industries and economies, and consumption and investment dynamics. We find that faster productivity growth in the service sector in Asia benefits all sectors eventually, and contributes to the sustained and balanced growth of Asian economies, but the dynamic adjustment is different across economies. This adjustment depends on the sectoral composition of each economy, the capital intensity of each sector, and the openness of each sector to international trade. In particular, during the adjustment to higher services productivity growth, there is a significant expansion of the durable manufacturing sector that is required to provide the capital stock that accompanies the higher aggregate economic growth rate.
    Keywords: service sector; labor productivity; general equilibrium model; asian economies
    JEL: J21 O11 O14 O41 O53
    Date: 2014–07–25
  19. By: Jeffrey T. Prince (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Daniel H. Simon (School of Public and Environmental Affairs, Indiana University)
    Abstract: We examine how mergers affect quality provision by analyzing five U.S. airline mergers, focusing on on-time performance (OTP). We find mild evidence that merging carriers’ OTP worsens in the short run. However, we find consistent evidence that in the long run, their OTP improves. Subsequent analyses indicate efficiency gains, not reduced load factor or passenger volume, underlie our long-run result. Additional analyses of quality provision (e.g., flight cancellations) show no long-run worsening in these areas by merging firms. In the long run, airline mergers do not result in worsening performance, at least along several measures, and provide some time-saving efficiencies.
    JEL: L0
    Date: 2014–01
  20. By: René Böheim; Thomas Horvath; Karin Mayr
    Abstract: We determine workforce composition and wages in rms in the presence of productivity spill-overs between co-workers. In equilibrium, workers' wages depend on the production struc- ture of rms, own group size, and aggregate workforce composition in the rm. We estimate the wage eects of workforce diversity and own group size by birthplace and the implied pro- duction structure in Austrian rms using a comprehensive matched employer-employee data set. In our data, we identify a positive eect of workforce diversity and a negative eect of own group size on wages, which suggest that workers of dierent birthplaces are complements in production on average.
    JEL: D21 D22 F22 J31
    Date: 2014–08
  21. By: Victor Duggan; Sjamsu Rahardja; Gonzalo Varela
    Keywords: Private Sector Development - E-Business Private Sector Development - Emerging Markets Transport Economics Policy and Planning International Economics and Trade - Trade and Services Public Sector Corruption and Anticorruption Measures Public Sector Development Transport
    Date: 2013–02

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